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Friday, October 31, 2014

My CNAV Analysis of Three Local Banks

As openly requested by one of my favourite pioneer retail investor-cum-blogger (CW8888) to do a CNAV (Conservative Net AssetValue) Analysis on our local banks i.e. DBS (D05), UOB (U11) and OCBC (O39), I am more than happy to accede to his request and hence this post (even though on the top of my head, I more or less know result that I am about to get).

It took me about 30 minutes to obtain the details and compiled the following summary (source of data : Yahoo Finance Singapore) :

In short, all three banks "failed" my CNAV test. It is not because they are not good enough but simply because they are not "convervative" enough ;-) Of cource, if you are looking at the counters from another investing strategy, the outcome might be totally different.

banks are in the business of borrowing and lending money, if you read any analyst report in the world, be it any country or region, none of them uses debt to equity ratio on a bank.to measure the financial stability or safest of a bank, normally one should look at tier 1 capital instead

also singapore banks are one of the most conservative in the world as compared to US and European banks, OCBC was also voted world's strongest bank by bloombergI strongly think you should read up more on how to value banks

Hi Felix : if i were to evaluate these "local financial institutions" with a regional presence (ie . our big three lar , pun intended, if you play fight the landlord you'll know what i mean ) all would fail my anyhow hantam valuation one , you see ah u bump their long term liabilities and short term liabilities by 80% and then lower their liquid assets by a 30-50% , see if they can tahan for one year or not . But well worst come to worse , they can ask for bailout , then there is something to watch out for though in the local banking scene , who might makan SCB's equity arm? oo

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